Sigh:
Independent Senator Nick Xenophon says the Labor Party’s negative gearing proposals go too far and he wouldn’t support them, but there may be a case for “very gentle tweaking” in close consultation with the property industry.
…Senator Xenophon said there may be a case for some tinkering around the edges on negative gearing policy, but it would need to be carefully managed so it didn’t impact the broader economy at a time when there was widespread transformation underway in Victoria and South Australia in particular, with manufacturing under pressure.
“It would have to be very, very carefully done and calibrated,” he said.
Outside the forum, Senator Xenophon said the fact that he had used negative gearing previously and owned four investment properties, which were now positively geared, had no influence on his own views about housing policy.
“I don’t see any conflict of interest,” Senator Xenophon told reporters in Adelaide. His directorship of a company which owns some apartments in a refurbished Adelaide office tower housing mainly international students has been under the spotlight.
That is the problem, Mr Xenoponzi. You see no conflict of interest despite:
- supporting negative gearing;
- supporting rampant population growth;
- supporting reform to boost property demand, and
- his own and his father’s slum lordship in the recent past.
It is the precise equivalent of being a pocker machine magnate that resists anti-gambling reform. Only it’s kind of worse given that the reason there is a “widespread transformation underway in Victoria and South Australia in particular, with manufacturing under pressure” is in part because of the property casino that is killing competitiveness.
Let’s also not forget that Nick Xenophon had previously called for negative gearing to be abolished on pre-existing homes and retained on newly constructed dwellings, in order to boost supply (i.e. Labor’s policy):
“If it’s modified to ensure that there is a real driver in new home investments with respect to the rental market, affordable housing, then negative gearing could play a very useful social and economic role.”
Thank heavens the old Jessica Irvine stands up today up to hose the horribly conflicted Xenoponzi:
Labor’s policy certainly moves in the direction of reducing the appeal of tax breaks for future investors who purchase established properties. It does so by removing the ability for new investors to claim losses on their rental properties as an offset to their taxable income, known as “negative gearing”. It also halves the tax discount on any capital gain made during the time the property is owned.
Of course, investors who already own their properties are protected, or “grandfathered”, so that they get to keep the ability to negatively gear for as long as they continue to own the property and to enjoy the bigger capital gains tax discount when they decide to sell.
So, there is in fact little incentive in Labor’s policy for existing landlords to liquidate en masse the properties they already own. Quite the opposite – the incentive is to retain these grandfathered properties in their portfolio for as long as they can to keep the perks. The removal of these properties from the market could actually support home prices, as would any rush to purchase properties ahead of the deadline to secure the tax perks.
However, for new investors looking to purchase in the future, the removal of tax breaks does make purchasing established properties for investment purposes less attractive. It is entirely plausible that this would lead to a one-off revision in investors’ appetite to buy established properties, which may lead to a fall in established house prices, or, more likely, slower growth than otherwise.
…A common belief might be that if investors lost their tax perks, they would be keener to positively gear their properties, ie, make sure their rental incomings exceed their mortgage payments.
But landlords can’t set rents on a “cost plus” basis.
If they did, every time interest rates went up, rents would go up.
No, landlords can only charge as much as the market can bear, determined by the relative forces of supply of rental properties and the demand for them. Labor’s policy could only increase rents if it resulted in increased demand for rental housing or decreased supply.
On the demand side, Labor’s policy, by cooling house prices, could be expected to reduce demand for rental housing by helping more renters, who were in fact frustrated buyers, exit the rental market.
…Labor’s policy to curb tax breaks for property investment is the best policy for young Australians since Whitlam made university free.
Precisely. And by doing so it would also reverse Xenoponzi’s “economic transformation” as interest rates and the dollar fall, radically boosting tradables like manufacturing. That is, SA and VIC would still have economies that could support higher standards of living rather than property ponzi schemes that are endlessly lowering them while enriching a few happy slum lords.
